GBP/AUD – Australian Dollar Strength could spell trouble for exports (Daniel Johnson)

Will AUD to USD Retest the All-Time Lows?

Positive Data from down under could warrant rate hike

The Australian economy has been performing well of late with strong economic data in abundance. We recently saw a release of manufacturing data which showed the highest levels since 2002.  I has been a volatile time due to the recent Nuclear missile test by North Korea over Japan with investors seeking out safe haven currencies due to the threat of conflict.

Poor non-farm payrolls data from the US caused many to leave the greenback, moving to the Aussie with increased risk appetite and the promise of higher returns. With strong economic data out of Australia it could be argued an interest rate hike is on the cards. Philip Lowe however, The head of the Reserve Bank of Australia (RBA) is nervous of the Australian Dollar becoming too strong. Australia is heavily reliant on the Chinese buying it’s raw materiel, particularly iron ore. Iron ore is Australia’s biggest export and has seen a rise in value of late. If goods become to expensive sue to the value of the Aussie this could force the Chinese to look elsewhere. I would imagine the RBA will attempt to talk down the value of the currency through jawboning rather than any drastic changes to monetary policy. Jawboning is a very difficult technique and savvy investors do not always take central banker’s words as gospel.

The pound is in a terrible spot at present. There are two key factor anchoring Sterling. First, political uncertainty. Political uncertainty historically weakens the currency in question and this is what we are witnessing with the pound. With Theresa Mays’s position in doubt due to threats from her own party the pound has little chance of recovery. Next up, Brexit, there is no clarity on the UK’s stance and there is conflict between UK negotiators and Brussels over payment of the proposed exit bill. Bad news is better than no news on the currency market which is why GBP/AUD still sits in the low 1.60s.

If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker when the outlook is so bleak for the pound . If you let me know the details of your trade I will endeavor to produce a free trading strategy to suit your individual needs. Have faith knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving.  I can be contacted at dcj@currencies.co.uk . (Daniel Johnson) Thank you for reading.